The Rural Housing Service is preparing to start guaranteeing single-family loans again, and sources expect the agency to make an announcement next week.
As the National Mortgage News website went to press, RHS officials did not return telephone calls and emails about their funding situation.
The RHS guarantee loan program – which can insure upwards of $16 billion a year in home mortgage product -- has been in turmoil since May due to funding problems and a transition to a new premium structure.
The loan guarantee program is now self-funding due to legislation passed during the summer. In addition, RHS decided to set the refinancing premium at 1%. Under the legislation, the refinancing fee could have been set at 2.25%.
Due to a slowdown in RHS lending this summer, the drop in mortgage rates and the 1% fee, it is "going to make a lot of sense for RHS borrowers to refinance," said one source familiar with the program.
During the summer, lenders had to rely on "conditional commitments" to make RHS loans, which subjects them to default risk and losses until the agency is able to guarantee the note.
RHS officials opened the guarantee window for a short two-week period in September, but closed it again on Oct. 1 – due to issues involving the continuing resolution to fund government operations through Dec. 3.
Those issues appear to be ironed out, allowing the agency to give the official green light again.
